Frugal Illusions: how we fool ourselves into thinking we're saving more than we actually are.

Drugstore rewards, cash back programs, stockpiling, gift card deals, BOGO and BOGOHO sales, etc. are all great ways to save money and I don't want to discourage you from continuing in your frugal ways!  My purpose in writing this post is to dispel some of the mind games that we sometimes might play to trick ourselves into thinking that we are saving more than we actually are.  I know I am guilty of this; I catch myself doing this all too much.  I'm hoping a little awareness and discussion will put a stop to it.  Feel free to post your $0.02 in the comments below.

1. Counting savings twice: Walgreen's Register Rewards. CVS Extra Cash Bucks.  Rite Aid Up and Up Rewards. There is a reason that these retail drugstore giants have these programs and an even better reason that the stores are making a ton of money off of them.  Why and how? Because we keep "rolling" these rewards back into future purchases.  It keeps us coming back to the same stores.  It is also a brilliant marketing plan in that we tend to "double-count" the rewards.  Here's what I mean by that:  if I buy something at Walgreen's for $20 and get $5 back in Register Rewards, in my mind I've spent only $15.  But then when I take those same $5 in Register Rewards and spend them on a $20 future purchase, in my mind, I've still only spent $15.  While I feel like I've saved $10, in reality, I've only saved $5.  That's counting savings twice.
   And my second point about this is that I haven't really saved $5; I've saved $5 worth of Walgreen's merchandise.  It's an important distinction, especially when you're trying to stick to a budget in order to pump up your savings account or pay off debts.  Remember, CVS ECBs are fantastic, but you can't pay a mortgage with them.
   Drug store programs aren't the ones that manipulate you into counting savings twice.  Cash back programs can also get you into this mindset.  If I buy something for $10 and get $4 in cash back, in my mind, I've only spent $6.  And then, when the check for that $4 actually arrives in the mail, I don't consider it as money already saved.  Instead, more often than not, I treat it as "free money."  I think the reason it happens is because of the time lag between saving the money on a purchase and receiving the check.
   Same thing happens with Target's $5 gift card promotions. Remember this great Scrubbing Bubbles deal I put together, where I stacked a fantastic Walmart price match with a Target gift card promo. In the end, I paid out $15, but I took home $25 in Target gift cards, so I considered it a $10 moneymaker. But was it really? Those $25 in gift cards can only be spent in one place, and that's Target. And I still had to take $15 out of my wallet. So, yes, this was a great deal, but was it really a "moneymaker?"
2. Buying things we don't need or want because they're cheap.  I'm not talking about breaking brand-loyalty here.  It's perfectly ok to buy Cheerios instead of Chex if Cheerios costs $1 and Chex costs $4, as long as you and your family like Cheerios and will eat it.  I'm talking about buying stuff you don't like or don't need because it costs less than a dollar or it is BOGO or you put together a great deal to get it. If you don't need it, don't want it, won't use it, then don't get it.  Period. Even if it's free (unless you will donate it or give it away immediately).   Because even if it costs nothing, it will take up precious room in your basement or garage, and there is a cost to clutter. And even if it is a steal, if you won't use it, whatever money you spent is wasted money.
   Back to my great Scrubbing Bubbles deal. In the end, I had purchased five Scrubbing Bubbles One-Step No-Hands toilet cleaning systems.  There's only one problem. We have two bathrooms in our house.  So why do I need five systems?  Fortunately, the systems all come with refills, so I will definitely put those to use.  But what about the cleaning mechanisms?  I had fooled myself into thinking that since I netted a profit of $2 in Target gift cards for each system I bought, they were worthwhile purchases.  And eventually, in a few years, each cleaning mechanism will wear out and need to be replaced.  All great justifications for buying five, but the bottom line is, I've got three of these taking up room on a shelf in my garage right now. See what I mean?
3. Stockpiling out of control. There are two ways to waste money with stockpiling.  The first is stockpiling more stuff than you will use in the next two years.  That takes up valuable space, and there is no reason to keep that much of anything around.  Lots of stuff, while not spoiling, may not be as good after two years. I once stockpiled way too much Pantene shampoo, and after a year and a half, the shampoo separated.  The oily stuff rose to the top and watery stuff went to the bottom. It all went back to normal when I shook the bottles, but still, it taught me a lesson in over-stockpiling. The second way to waste money is to store things improperly.  The best place to store foods that have the potential to become stale is in a closed, airtight container in the coldest part of your freezer.  I don't store any food at all in my garage, even cans, because it gets very warm in the summer and goes below freezing in the winter and those are extremes that can affect even sealed food.  I store all non-perishable food items in my pantry and my consistently cool basement.
4. The savings sound way better than they are.  Marketing, marketing, marketing.  If Payless Shoes had a 25% off sale instead of a BOGOHO (buy-one-get-one-half-off) sale, would they do as well?  We know from doing our Shoppers Math that a 25% off sale is basically the exact same thing as BOGOHO, at least when both items are the same price. When they differ in price, your savings drop below 25%.  But a BOGOHO sale sounds much more enticing than a 25% off sale, doesn't it? After all, we're getting half off!  But actually, we're not.  

I'm not suggesting for a minute that we stop attempting to follow all of these frugal methods. What I am proposing is that we catch ourselves at all the little mind tricks we might play to make ourselves think we're saving more than we actually are, which ultimately, will cost us more.

Pin It